Law Firm Benefit Trends Paint Conflicted Picture

Frenkel Benefits recently released our 2013 biennial Law Firm Survey analyzing key trends emerging in the benefit programs of large law firms. In all, 51 firms participated, accounting for nearly 25,000 law firm employees and $330 million of healthcare spend. The results paint a somewhat conflicted picture as law firms race to manage plan expenses while continuing to lag the broader market’s adaptation of consumerism as a prominent cost-mitigation strategy. In fact, most of the design changes can be categorized as “stealth cost shifting” – changes that preserve the more visible features of the health plans but reduce the plans’ cost in less recognizable ways.

Healthcare inflation at law firms was 7%, exceeding national employer-sponsored healthcare plan inflation by 2%, which reflects the industry’s reluctance to dilute benefit levels—contrary to other employers. Nationally, healthcare inflation reached its lowest levels in over 50 years and, for the first time in 15 years, grew at a slower pace than GDP. Similarly, dental plan costs for law firms have increased 4%, far in excess of the 1% increase nationally for middle market employers

Associates and staff have shared the burden of runaway plan costs, as the majority of firms tether the employee cost to a percentage of the total plan rate (varied by salary and tier). However, 35% of law firms surveyed actually increased the employee share of monthly premium as one of their primary cost control strategies – resulting in contribution increases greater than the plan’s underlying medical trend

PPO/POS plans continue to be the plan of choice, enrolling over 50% of law firm employees. In-network only HMO/EPO-style plans saw an increase in enrollment to 22% from 13%. High Deductible Health Plans (HDHPs) have seen little traction outside the Partnership class, whose members enroll in these programs because of their favorable tax treatment. This remains in stark contrast to the broader market, which increasingly embraces these more efficient designs that reduce healthcare consumption by 10-15% while maintaining actuarially neutral benefits

Though median in-network PPO plan deductibles and coinsurance have remained at $500 and 90%, respectively, out-of-pocket maximums have increased nearly 50% to $2,500 in-network and $6,000 out-of-network, which will be apparent only to high users

While more firms have embraced self-funding, many law firms remain resistant. Only two-thirds of firms with more than 1,000 employees self-fund their medical claims (compared to over 80% of employers nationally). After considering the additional taxes introduced by the Affordable Care Act, expected savings from self-funding have widened to 7-10% of gross premium rates. It is now commonplace to see employers as small as 50 employees self-insure their programs, although quite infrequently in the law firm sector

Wellness offerings from law firm survey participants have scaled back, with fewer providing newsletters, gym discounts and on-site screenings, but there was an increase in firms offering on-site exercise facilities. Participants offering programs listed the desire to improve the health of employees as the primary driver – nearly double those who said their main reason was reducing healthcare costs. Over 80% of law firms did not know or had not considered the expected ROI on their wellness initiatives – about 15% higher than our non-law firm survey results

PTO allocations have increased approximately 2 days across all classes of employees, with median new hires now receiving a bank of 17 days and veteran employees (more than 10 years of service) receiving 27 days

Other key trends include a gradual but noticeable movement away from blanket coverage of post-retiree medical for Partners and an increasing number of firms offering transgender surgery coverage, infertility benefits and domestic partner coverage.

About Adam Okun

Adam Okun, ASA, MAAA, Executive Vice President
Adam Okun oversees compliance, financial reporting and manages a number of the largest client relationships at Frenkel Benefits. He has received national recognition as an expert in the financial implications of the Affordable Care Act, presenting to some of the largest global firms in the legal and accounting industries on the compliance, administrative and tax consequences of the legislation.
Adam joined Frenkel after spending his early years at a national consulting firm, advising large Fortune 500 clients on their health and benefits offerings and cost management strategies. He is an Associate of the Society of Actuaries (ASA) and Member of the American Academy of Actuaries (MAAA). Adam was on the Executive Committee of the Actuarial Society of Greater New York (ASNY) for four years and served as Acting Treasurer for two years. Adam is quoted frequently in business publications such as the Wall Street Journal, Bloomberg BNA, ABA Journal and Law360. Recent public speaking events include the WSJ webcast “What the Healthcare Law Means for You,” bSwift’s “Idea Exchange,” NJ State League of Municipalities Conference, the Actuarial Career Day at Columbia University and the recent Frenkel Seminar “Managing Law Firm Benefit Plans in a Challenging Environment.”

Send us a Question

GET THE WHITEPAPER

Please be aware that this does not represent legal or tax advice and is only Frenkel's interpretation of the laws, regulations and statutes. It is highly recommended that you seek the advice of your legal and tax professional as to the applicability of this information to your particular situation.